The Prediction Game

06 Dec 2013

A couple of months ago at the Financial Services Expo show a panel of lender representatives were all asked their predictions for what gross mortgage lending might be at the end of 2014. 

Not one of the panel were willing to go higher than £190bn, indeed, one person suggested that figure might be ‘toppy’ and the broad consensus was a figure of around £180-185bn. 

I bring up this collection of views because the sense I get from many in the market is that now £190bn is not ‘toppy’ at all. Indeed, I have read of many predicting the £200bn mark will be breached over the course of the year. 

Let’s just say that two months is clearly a long time in the mortgage market and to achieve this figure over the course of the next 12 months is likely to mean close to a 20% increase on gross lending this year. 

While the prediction game is a fun one to play – particularly in a rising market – I would hope we do not all get carried away when there are still a large degree of unknowns and some considerable obstacles to overcome. 

Many in the market appear to be putting great faith in the government’s Help to Buy 2 scheme delivering a significant push to lending levels however we should also not forget the Mortgage Market Review and the potential drag this might have on lenders as they seek to get their systems and process ready and working correctly in the new regulatory landscape.

I suspect that, like most years, 2014 will be a year of peaks and plateaus and I’m anticipating that the market will hit the ground running in the early months of the year however come spring we may see lenders re-evaluating their lending appetite. 

We should also not forget that many a bullish prediction has been made in recent weeks however these were before the Bank of England made its decision to curtail lenders from using the Funding for Lending Scheme to lend to households. 

The true outcome of this is yet to be known but it’s fairly obvious that some lenders may not be able to secure such a cheap source of alternative funds easily and therefore this may have an impact on both appetite and rates.

What I would say however in all this talk of positive markets is that, if it does pan out to be a particularly strong year for lending, we should not, a) get carried away with marketplace, or b) lose sight of the principles that have held us in good stead throughout the, shall we say, ‘less good’ times. 

I read a recent article by Rob Sinclair of the Association of Mortgage Intermediaries which, while welcoming a much more positive mortgage market, warned advisers that more business should not mean a move towards the margins in terms of compliance, case checking, lender research and anything else associated with maintaining the quality of the case. 

To me, this is a crucial point to make and one that, in a MMR world, has never been so important. For all those who look at the year ahead with pound signs in their eyes I hope there remains a focus on treating customers fairly and seeking to ensure that all bases are covered. 

One suspects that successful advisers over the past few years have diversified intelligently and made the most of all a client’s needs be those protection, general insurance, conveyancing, legal services, etc. 

Just because mortgage business levels may be on the up does not mean we should neglect those other areas – indeed, being active in them should mean even stronger benefits for the business.

Therefore, while I will be the first to enjoy any mortgage marketplace which shows a yearly 20% increase I will also be the first to keep my feet on the ground and be realistic and responsible about what this type of market means for all stakeholders. 

It is important that a stronger market is also a sustainable one and we all have our part to play in ensuring this.

And on that note, given this is my last missive of 2013 I will wish you all a very Merry Christmas and a prosperous 2014.

Bob Hunt

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